The category named System Data (or Other) is a general category that measures the storage space used by all Apple and third-party files that don’t belong to any more specific category like Applications, Documents, Messages, Music Creation, Podcasts, Trash, and TV.
You can’t directly manage the contents of system data; that is done by macOS. The category varies in size depending on the current state of your Mac.
What you can do to create more free space:
• Empty the Trash in the Dock.
• Empty the trash in the Photos app.
• Delete unused and unneeded application installers from your downloads folder and desktop. No need to store on your Mac what you can freely download any time.
• Reboot your Mac at least weekly. Let the OS do its housekeeping.
• Transfer files that you don’t use daily to an external drive and then delete them from the startup drive and empty the trash. Files that take up the most room are movies, images and music.
This from Apple on the subject of freeing up space:
Free up storage space on Mac - Apple Support
Also, please see the following guidance from Apple:
Find and delete files on your Mac - Apple Support
MacOS does keep a number of Time Machine snapshots on the drive as part of the backup process. TM snapshots can occupy a significant amount of drive space. You can disable the creation of these many TM snapshots by setting TM to backup manually rather than automatically at intervals.
You can view and manage these in Disk Utility or in the Terminal app.
View APFS Snapshots in Disk Utility on Mac - Apple Support